[Federal Register Volume 61, Number 214 (Monday, November 4, 1996)]
[Notices]
[Pages 56682-56684]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-28277]
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FEDERAL TRADE COMMISSION
[File No. 911-0008]
Montana Associated Physicians, Inc.; Billings Physician Hospital
Alliance, Inc.; Analysis to Aid Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed consent agreement.
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SUMMARY: In settlement of alleged violations of federal law prohibiting
unfair or deceptive acts or practices and unfair methods of
competition, this consent agreement, accepted subject to final
Commission approval, would prohibit, among other things, two
organizations of Billings, Montana physicians from negotiating or
refusing to deal with third-party payers; determining the terms upon
which physicians deal with such payers; or fixing the fees charged for
any physicians's services. The agreement settles allegations that the
respondents obstructed the entry of managed care plans into Billings,
agreed on prices that they would accept from third-party payers, and
otherwise acted to thwart cost-containment measures. According to the
Commission, these actions resulted in higher prices and fewer health
care choices for patients of Billings physicians.
DATES: Comments must be received on or before January 3, 1997.
ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,
Room 159, 6th St. and Pa. Ave., N.W., Washington, D.C. 20580.
FOR FURTHER INFORMATION CONTACT:
Mark Whitener, Federal Trade Commission, H-374, 6th and Pennsylvania
Ave, NW, Washington, DC 20582. (202) 326-2845. Robert F. Leibenluft,
Federal Trade Commission, S-3115, 6th and Pennsylvania Ave, NW,
Washington, DC 20582. (202) 326-2756.
SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46, and Section 2.34 of
the Commission's Rules of Practice (16 CFR 2.34), notice is hereby
given that the above-captioned consent agreement containing a consent
order to cease and desist, having been filed with and accepted, subject
to final approval, by the Commission, has been placed on the public
record for a period of sixty (60) days. The following Analysis to Aid
Public Comment describes the terms of the consent agreement, and the
allegations in the accompanying complaint. An electronic copy of the
full text of the consent agreement package can be obtained from the FTC
Home page, on the World Wide Web, at ``http://www.ftc.gov/os/actions/
htm.'' A paper copy can be obtained from the FTC Public Reference Room,
Room H-130, Sixth Street and Pennsylvania Avenue, N.W., Washington,
D.C. 20580, either in person or by calling (202) 326-3627. Public
comment is invited. Such comments or views will be considered by the
Commission and will be available for inspection and copying at its
principal office in accordance with Section 4.9(b)(6)(ii) of the
Commission's Rules of Practice (16 CFR 4.9(b)(6)(ii)).
Analysis of Proposed Consent Order To Aid Public Comment
The Federal Trade Commission has agreed to accept, subject to final
approval, a proposed consent order settling charges that Montana
Associated Physicians, Inc. (``MAPI'') and the Billings Physician
Hospital Alliance, Inc. (``BPHA'') violated Section 5 of the Federal
Trade Commission Act.
The proposed consent order has been placed on the public record for
sixty (60) days for reception of comments by interested persons.
Comments received during this period will become part of the public
record. After sixty (60) days, the Commission will again review the
agreement and the comments received and will decide whether it should
withdraw from the agreement or make final the agreement's proposed
order.
The purpose of this analysis is to facilitate public comment on the
agreement. The analysis is not intended to constitute an official
interpretation of either the proposed complaint or the proposed consent
order, or to modify their terms in any way.
The proposed consent order has been entered into for settlement
purposes only and does not constitute an admission by MAPI or BPHA that
the law has been violated as alleged in the complaint.
The Complaint
The complaint charges that MAPI restrained competition among
physicians in the area of Billings, Montana, by, among other things,
combining or conspiring with its respective physician members or acting
as a combination of its physician members to fix the terms under which
they would deal with third-party payers, and to conduct boycotts and
other resistance to cost-containment efforts. The complaint further
charges that MAPI was extensively involved in BPHA's formation, had the
power to affect and control BPHA's dealings with third-party payers
seeking contracts for physician services, and that BPHA carried on
MAPI's anticompetitive conduct. The allegations set forth in the
Commission's complaint are summarized below.
MAPI is an association of approximately 115 physicians in over 30
independent practices. These physicians constitute approximately 43% of
all physicians in Billings, Montana. Most of the other physicians in
Billings are part of a multispecialty physician group practice. MAPI's
members constitute over 80 percent of all ``independent'' Billings
physicians, that is, those who are not part of the multispecialty
physician practice or employed by a hospital. Third-party payers
seeking to contract with a Billings physician panel constituting a
range of physician services must either contract with the
multispecialty physician practice or with many MAPI members.
The complaint charges that MAPI was formed in 1987 in substantial
part to be a vehicle for its members to deal collectively with managed
care plans. At that time, there were no health maintenance
organizations (HMOs) or preferred provider organizations (PPOs)
operating in Billings, but physicians there were concerned that such
plans would soon attempt to enter Billings, and that competitive
pressure could force physicians to deal with such plans at reduced
prices or on other than usual fee-for-service terms. The purpose of
engaging in collective dealings through MAPI was to obtain greater
bargaining power with third-party payers by presenting a united front,
and thereby to resist competitive pressures to discount fees and to
avoid accepting reimbursement on other than the traditional fee-for-
service basis.
In 1987, MAPI began negotiating with third-party payers on behalf
of its members. Members of MAPI who were approached by managed care
plans told the plans to deal with MAPI. When HMO Montana, an HMO owned
and operated by Blue Cross/Blue Shield of Montana, sought to contract
with MAPI physicians, MAPI rejected all contracts proposed by the HMO.
No member of MAPI entered into a contract with HMO Montana until 1993,
after MAPI became aware of the Commission's investigation. When another
health plan sought to establish the first PPO program in Billings, MAPI
offered a contract to the health plan that provided
[[Page 56683]]
for physicians to be paid their usual fees with no discounts, and
represented to the health plan that this was what MAPI's members would
accept. When the health plan subsequently sought to collect current fee
information from MAPI members in order to devise a proposed physician
fee schedule, MAPI urged its members to submit prices higher than they
were currently charging in order to inflate the fees the health plan
developed for the schedule.
In addition, MAPI gathered detailed fee information from its
members, enabling MAPI to determine for most physician services the
prevailing fees and the maximum reimbursement allowed by Blue Cross/
Blue Shield of Montana. Using this information, MAPI advised certain
physicians to raise their fees, and some fees were raised in accordance
with these recommendations.
In 1991, MAPI joined with Saint Vincent Hospital and Health Center
in Billings to form BPHA, a physician-hospital organization. Almost all
of MAPI's members joined BPHA, making MAPI members a substantial
majority of BPHA's physician membership. BPHA's structure and
governance gave MAPI substantial control over BPHA dealings with third-
party payers regarding physician contracting, and thus allowed MAPI to
continue to exercise the collective power of its physician members in
BPHA's dealings with third-party payers seeking contracts.
Through BPHA's Physician Agreements, MAPI was designated as the
agent of almost all BPHA physicians who were MAPI members with respect
to their membership in BPHA. This agency designation gave MAPI the
authority to accept or reject all contracts negotiated by BPHA with
third-party payers, as well as the power to elect and remove physician
members of BPHA's Board of Directors. In addition, BPHA's structure
gave its physician members (most of whom were MAPI members) the ability
to control BPHA's pricing and other terms of contracts for physician
services.
By virtue of this structure, MAPI was able to carry on its unlawful
activities through BPHA. Though payers sought to contract with BPHA for
physician services, and did contract with Saint Vincent directly for
hospital services, BPHA did not enter into any contract for physician
services until nearly two years after its creation, after the time BPHA
and MAPI became aware of the Commission's investigation.
Although MAPI and BPHA did not explicitly bar their members from
dealing with managed care plans individually or on terms other than
ones endorsed by MAPI or BPHA, these physicians largely dealt with such
plans exclusively through MAPI and BPHA. Physician members and
officials of MAPI and BPHA directed payers to deal with MAPI and BPHA
rather than with individual physicians. Few physicians who were members
of MAPI or BPHA participated in any managed care plans.
Neither the physician members of MAPI, nor the physician members of
BPHA, have integrated their practices in any economically significant
way, nor have they created efficiencies sufficient to justify their
acts or practices described above.
The complaint charges that the conduct of MAPI and BPHA has injured
consumers by restraining competition among physicians, fixing or
increasing prices for physician services, and depriving third-party
payers and patients of the benefits of competition among physicians.
The Proposed Consent Order
The proposed consent order would prohibit MAPI and BPHA from
engaging in any agreement with physicians to (1) negotiate or refuse to
deal with any third-party payer; (2) determine the terms upon which
physicians deal with such payers; or (3) fix the fees charged for any
physician's services. In addition, under Part III of the proposed
consent order, MAPI is prohibited from: (1) advising physicians to
raise, maintain, or otherwise adjust the fees charged for their medical
services; (2) encouraging adherence to any fee schedule for physicians'
services; and (3) encouraging any person to engage in any action
prohibited by the order.
Notwithstanding these provisions, however, the proposed consent
order would not prevent MAPI and BPHA from operating, or participating
in, a legitimate joint venture. First, MAPI and BPHA respectively, if
they are operating through a ``risk-sharing joint venture,'' may enter
into agreements with physicians regarding terms of dealing with third-
party payers, provided that the physicians participating in the venture
remain free to deal individually with third-party payers. A ``risk-
sharing joint venture,'' for purposes of this order, is one in which
physicians who would otherwise be competitors share a substantial risk
of loss from their participation in the venture.
The order's proviso permiting MAPI and BPHA to engage in joint
dealing through ``risk-sharing joint ventures'' extends only to those
that are ``non-exclusive,'' that is, those in which the participating
physicians are available to contract with payers outside the venture.
Although exclusive physician networks are not necessarily
anticompetitive, they can impair competition, particularly when they
include a large portion of the physicians in a market. Given the large
share of the physicians in Billings that participated in MAPI and BPHA,
along with evidence that as part of the challenged conduct these
physicians largely refused to deal with managed care plans outside of
MAPI or BPHA, the proviso does not permit exclusive risk-sharing
ventures.
The proposed order allows MAPI and BPHA to operate or participate
in joint ventures that involve collective price setting by competing
physicians, even if those physicians do not share substantial financial
risk as defined in the order, provided that they first receive the
prior approval of the Commission. The order uses a prior approval
provision because it is not feasible to define in an order all of the
types of procompetitive joint ventures that MAPI or BPHA might seek to
operate. The prior approval mechanism will allow the Commission to
evaluate a specific proposal and assess its likely competitive impact.
Allowing MAPI and BPHA the opportunity to seek prior approval of non-
risk-sharing joint ventures will help to ensure that they are able to
respond to dynamic changes in health care markets in ways that promote
competition, while guarding against the recurrence of acts and
practices that have restrained competition and consumer choice.
In addition, the proposed order contains a provision designed to
make it clear that BPHA, as a physician-hospital organization, can take
actions to facilitate contracting between its physician members and
third-party payers that do not create or facilitate the kind of
agreements that the order prohibits. The provision sets forth the
aspects of a ``messenger model'' that would not run afoul of the order.
The messenger model used here is remedial, and tailored to particular
facts and circumstances.
The proposed order would also specifically permit BPHA to keep in
effect contracts with third-party payers that were in effect on
September 30, 1994, in order to avoid any disruption that might result
from applying the order's prohibitions to those existing contractual
arrangements.
Part V of the proposed order would require MAPI and BPHA to publish
and distribute copies of the order and accompanying complaint. Parts VI
and VII of the order impose certain reporting requirements in order to
assist the Commission in monitoring compliance with the order.
[[Page 56684]]
The proposed consent order would terminate 20 years after the date
it is issued.
Donald S. Clark,
Secretary.
Concurring Statement of Commissioner Mary L. Azcuenaga in Montana
Associated Physicians, Inc.
[File No. 911-0008]
I concur in the decision to issue the complaint and accept the
order for public comment and write separately to emphasize two
points. First, the complaint and order do not directly challenge the
organization and conduct of the Billings Physician Hospital
Alliance, Inc., as a physician hospital organization (PHO), and in
my view, this order should cast no shadow on the activities of
PHO's. Second, although I concur in the unusual and complicated
fencing-in relief in the particular circumstances of this case, in
my view, this negotiated order is not, and should not be viewed as,
a guide for what a PHO can and cannot do.
[FR Doc. 96-28277 Filed 11-1-96; 8:45 am]
BILLING CODE 6750-01-M
